The Securities Commission of Malaysia (SC) has revised its Special Purpose Acquisition Company (SPAC) framework to create more flexibility for successful SPAC listings and de-SPAC mergers.
According to an SC statement on Thursday, the revisions include allowing SPAC acquisition deals to be conducted through the issuance of shares rather than cash alone, permitting additional financing to be raised through private placements for SPAC mergers, and reducing the minimum SPAC IPO size from RM150 million to RM100 million.
Seasoned private equity and venture capital investors will also be allowed to “steer SPACs” due to their asset sourcing and dealmaking expertise. The move is expected to further broaden Malaysia’s SPAC target universe and spur successful acquisitions.
“The SC re-evaluated the SPAC framework to ensure that it remains relevant and capable of spurring interest in listings and deals involving SPACs, thereby providing issuers with greater access to the capital market,” said SC Chairman Datuk Syed Zaid Albar in the statement.
SPACs are not new in Malaysia. The SC first introduced the SPAC listing framework in 2009 as a way to bolster PE dealmaking and merger and acquisition (M&A) activity to enhance the depth and competitiveness of the Malaysian market.
Malaysian SPACs, however, have enjoyed limited success with just a handful of blank cheque IPOs since launch and even fewer successful SPAC mergers.
According to The Malaysian Reserve, a total of five SPACs were listed on Bursa Malaysia. They were: Hibiscus Petroleum in July 2011, Cliq Energy in April 2013, Sona Petroleum in July 3013, Reach Energy in August 2014 and Red Sena in December 2015. Out of the five, only two were able to secure acquisition targets. The rest liquidated.
SC’s revised framework of lowering the threshold for SPAC merger shareholder approvals is seen as a move to enhance successful mergers. Simple majority approval by all shareholders present and voting will now be required compared to a minimum 75% majority.
At the same time, the SC has provided support to existing shareholders by limiting dilution – requiring new shares issued from the exercise of warrants to be restricted to no more than 50% of the total number of shares issued by the SPAC.
The minimum IPO price has also been raised from RM0.50 to RM2.00 to protect retail investors who may not be able to bear the risks commonly associated with SPAC investing.
According to the SC, the revised SPAC framework will take effect on 1 January 2022.